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El-Shazly
Econ 318
Analytical Exercise 1
Yi = 0 + 1 X 1i + 2 X 2i + + k X ki + u i , i = 1, , n
b. List the least squares assumptions in the multiple regression model and derive the
expression for the ordinary least squares (OLS) estimator of the regression coefficients in
matrix form.
PX = X(XX) 1 X , and
M X = I n PX
= P Y , and
Y X
=M Y=M U
U X X
3. Show that the following two formulae for the F-statistic to test joint hypothesis about
regression coefficients are equivalent (assuming homoskedasticity of the conditional variance
of the errors in the linear multiple regression model)
( SSRr SSRur ) / q
F= , and
SSRur /(n k ur 1)
( Rur2 Rr2 ) / q
F=
(1 Rur2 ) /(n k ur 1)
where SSR denotes sum of squared residuals, R 2 denotes the coefficient of determination, ur
denotes unrestricted model, r denotes restricted model, and q and n k 1 are degrees of
freedom, where q is the number of restrictions on the (k + 1) regression coefficients and n is
the number of observations in the model.